Course: Marketing Analysis & Strategy Date: March 7, 2013 Reference: HBR Case – "BMW of North America: Dream It. Build It. Drive It"

1. BMW of North America:
Dream It. Build It. Drive It.
IM513
Marke+ng
Analysis
&
Strategy
–
KAIST
Business
School
Team
B
–
The
Outliers:
Sung
Taek
Cho,
Kun-­‐hee
Han,
Seung
Yun
Lee,
Na
Yoen
Nancy
Lew,
Anggriawan
Sugianto,
Sithandone
Prachansiri

2. Outline
1 Problem
2 Analysis
3 Strategy
4 Mass Customization
5 Recommendation

3.
BMW
of
North
America:
Dream
It.
Build
It.
Drive
It.
Problem

4. Problem
1. What?
• BMW
mass
customizaCon
has
been
a
successful
strategy
for
North
America
to
boost
the
X3
sales
(+457%
in
2011).
• Joseph
Wierda
wonder
if
they
should
expand
this
strategy
to
new
models
or
exisCng
one
with
struggling
sales.
• What
are
the
real
benefits
and
weakness
of
a
mass
customizaCon
strategy?
2. Why?
• BMW
is
now
the
leader
on
luxury
cars
segment
and
try
to
see
how
it
could
keep
this
posiCon?
• New
models
are
planning
to
be
schedule.
• Is
mass
customizaCon
the
only
element
that
could
explain
this
bump
in
sale?
• Is
the
customer
more
sensiCve
to
waiCng
Cme
or
tailored
offer?

5. Problem
3. How?
• Conduct
some
research
to
decide
which
strategy
to
adopt
for
future
models
in
terms
of
mass
customizaCon.
• What
will
it
imply
in
terms
of
supply
chain
organizaCon
(move
the
producCon
to
US
or
import
cars?
• How
to
manage
our
relaConship
in
the
future
with
car
dealers?
What
will
be
the
best
strategy
to
adopt
for
the
future?
More
mass
customiza+on
for
all
model
or
keeping
it
for
some
specifics
models?

6.
BMW
of
North
America:
Dream
It.
Build
It.
Drive
It.
Analysis

7. Overview
• The
issue
of
the
market
was
market
growth
• US
Economy
is
gradually
overcoming
its
deep
crisis
• Consequently,
US
Car
market
is
also
on
the
recovery
a_er
2009
US
GPD
Growth
rate
Car
Unit
Sales
in
USA
mn
%,
yoy
Source
:
Bureau
of
Economic
Analysis,DB
Research,
2012
Source
:
Bureau
of
Economic
Analysis,DB
Research,
2012

8. Customers
• For
50
years,
Consumer’s
percepCon
of
Car
changed
• Consumers
are
more
focusing
on
“PragmaCsm”
these
days
• For
the
real
usage,
not
for
showing
off,
as
they
need
and
want
Pragma+sm
Luxury/
Large
Key
U+lity
word
Fuel
Efficiency
Performance
1960-­‐1972
1973-­‐1983
1984-­‐1995
1996-­‐2007
2008~
Golden
Growing
Before
A_er
Oil
Shock
Age
Period
Crisis
Crisis
Source
:
hhp://Kari.hyundai.com,
2012

9. Company
• BMW
is
in
the
1st
posiCon
in
the
US
luxury
car
market
unCl
now
• 2011
vs.
2012,
Sales
of
Small
sedans/CUVs
Increased
in
BMW
TOP3
Luxury
Cars
in
US
Sales
changes
in
BMW
unit
1,000
unit
Change
in
Aributes
-­‐2012.09
-­‐2011.09
%
BMW
1
Series
168,426
129,041
30.5%
199
?
220
BMW
3
Series
286,622
288,077
-­‐0.5%
BMW
5
Series
263,738
250,666
5.3
Sedans
245
?
225
BMW
6
Series
16,607
5,314
-­‐
BMW
7
Series
43,794
48,842
-­‐10.3
229
248
?
BMW
X1
10,2519
94,294
8.7%
BMW
X3
107,833
83,754
28.7%
2010
2011
2012-­‐now
BMW
X5
76,725
75,055
2.2%
CUVs
BMW
X6
31,497
31,357
0.4%
LEXUS
BENZ
BMW
Source
:
BMW
2012
3Q
report
Sedans
CUVs
Source
:
hhp://Online.wsj.com,
Modified
:
all
asserted
their
posi+ons
as
:
made
a
strong
contribu+on
to
the
leaders
in
their
relevant
segments
overall
success
of
the
brand
except
3
series

10. Product
BMW
X3
Customiza0on
Service
Posi%oning
Posi%oning
• Mid
size
Premium
CUV
segment
• Fulfill
specific
needs
of
each
consumer
with
high
quality
customizaCon
Compe%tor
• Vs.
Audi
Q5
Compe%tor
• Vs.
Benz
GLK
• Vs.
Private
Tuning
shops
• Vs.
Other
luxury
brand
Customizing
Service
Character
of
Targets
Character
of
Targets
• Household
w/
children
–
spacious
• AcCve
lifestyle
–
outdoor
acCviCes
• Self-­‐Expressional
• ProacCve
in
expressing
themselves
• AcCve
lifestyle
• Younger,
ambiCous,
progressive
• High
self-­‐esteem
• Freedom,
youthful
spirit,
• Freedom
and
independence
independence
Source
:
BMWeducaCon.com

11. Compe+tors
• CompeCtors
in
same
category
are
not
differenCated
enough
• Even
targets
are
not
same,
but
the
only
differenCaCon
is
their
brand
Compe+tors
Comparison
Aributes
BMW
X3
AUDI
Q5
BENZ
GLK
Safety
Luxury
Compact
Upscale
Midsize
Luxury
Compact
Category
SUVs
Cars
SUVs
Price
Household
Couple
or
family
Target
Affluent
Mom
w/
children
w/o
children
Performance
$38,850
-­‐
$37,850
-­‐
$37,090
-­‐
Price
$43,950
$68,900
$39,090
Mass
Design
Customiz-­‐ YES
/
2wk
NO
YES
/
8wk
a+on
Benz
Audi
BMW

12.
BMW
of
North
America:
Dream
It.
Build
It.
Drive
It.
Strategy

13. Targe+ng
1. The
people
who
are
NEW
to
the
luxury
market.
2. People
in
their
20s,
30s
or
40s
who
are
stepping
out
of
domes+c
and
non-­‐premium
SUVs.
3. Young
families
who
need
SUV
with
space
but
not
large
size.
4. People
who
have
money
and
can
afford
luxury
cars.

14. Posi+oning
Brand
posi+oning
1. Connect
the
dots
by
extending
BMW’s
high
quality
reputaCon.
2. Emphasize
the
“Not
individual
Thema+c
posi+oning superiority
of
BMW
in
branding
but
comparison
to
its
ü Appeal
to
the
consumers
by
brand
extension”
compeCtors.
using
senCmental
brand
themes
such
as
quality
Cme
with
family,
memories
or
love
Enjoy
your
luxury
“Acceptable
Price
posi+oning
ü PPL
in
Family
movies
or
TV
of
BMW
with
shows.
price”
whole
Family
1. AhracCve
Style
and
ü Emphasize
the
fact
that
Superior
Quality
for
safety
of
your
family
comes
Acceptable
Price
first
2. RealizaCon
of
fuel
efficiency
and
low
maintenance
cost

15. Consumer
value
Cost
to
sa+sfy
•
Luxurious
high-­‐class
design
Price
differenCaCon
•
•
Mass
customiza+on
PromoConal
price
in
auto
show
•
Marketing
Mix
Communica+on
Convenience
to
buy
•
Online
rela+onship
Extra
services
in
auto
dealer
•
•
EmoConal-­‐touch
communicaCon
Premium
freebies
•

16.
BMW
of
North
America:
Dream
It.
Build
It.
Drive
It.
Mass
Customiza+on

17. Mass
Customiza+on
• Mass
customizaCon
allows
firms
to
produce
only
things
their
customers
want
or
produce
a_er
they
have
orders
in
hand.
• General
Advantages
• Lower
inventory
levels
&
Eliminate
of
material
waste
:
ProducCon
to
orders,
not
produce
to
stock
• Increase
cash
flow
:
Lower
inventories,
prepayment
• Shorten
Cme
of
responsiveness
:
accumulaCve
Cme
from
receiving
orders
to
delivering
• Customer
sa+sfac+on
:
Maximized
market
share
&
sales
• Approaches
To
Mass
CustomizaCon
• Collabora+ve
customizers
:
these
organizaCons
establish
a
dialogue
to
help
customers
arCculate
their
needs
and
then
develop
customized
outputs
to
meet
these
needs
(Levi’s,
Nike,
Dell)
ß
BMW
• Adap+ve
customizers:
customers
buy
a
standard
product
but
they
can
modify
it
by
themselves
based
on
their
needs
(Microso_
:
Add
more
funcCon
a_er
purchase)
• Cosme+c
customizers:
these
companies
produce
a
standard
product
but
present
it
differently
to
different
customers
(
Wal-­‐Mart,
7-­‐Eleven
:Planters
packages
it
peanuts
and
mixed
nuts
in
a
variety
of
containers
on
the
basis
of
specific
needs
of
its
retailing
customers
)
• Transparent
customizers:
These
companies
provide
custom
products
without
the
customers'
knowing
that
a
product
has
been
customized
for
them.
(
Amazon.com
:
book
recommendaCons
)

18. Failure
case
of
The
automobile
industry
in
Mass
Customiza+on
Prac+ces
by
2008
Automobile
Industry
Brands BMW,
GM,
Toyota
Conclusion Almost
Failure
1.
Impossible
to
set
up
their
own
dealers
(ProhibiCon
of
most
US
states)
-­‐
Dealers
prefer
large
stock
to
show
variety
for
consumers
to
chose(opposite
of
mass
customizaCon)
-­‐
it
is
hard
for
carmakers
to
pursue
low
inventory
and
adapt
to
individual
demands
since
dealers
think
differently
from
auto
manufacturers
2.
Weak
connecCon
between
carmakers
and
customers
-­‐
Buyers'
informaCon
does
not
go
directly
to
the
carmakers,
as
customers
rely
on
the
dealers
Reasons
3.
Require
many
operaConal
changes
4.
Modules
could
involve
increased
redundancy
and
within
the
supply
chain
compared
to
using
non-­‐modular
components
5.
Cost
of
mass
customizaCon
is
a
big
problem
carmakers
are
facing.

19. Strategies
For
Mass
Customiza+on
• Key
Success
Factors
• Strategies
• Modular
product
design
• DifferenCaCon
• Flexible
manufacturing
process
• Lower
Cost
• SophisCcated
order
management
• Supplier
RelaConships
(Or
Alliance)
• Integrated
informaCon
system
Outsourcing
• Postponement
of
assembly
• Forward
IntegraCon
DistribuCon
Network
Of
Customer
RelaConship
Developments
•
OrganizaCon
Structure
• OpCmal
level
of
customizaCon
• The
value
and
cost
of
customizaCon
has
the
following
relaConship
to
the
degree
of
customizaCon.
It
is
crucial
to
find
the
point
where
the
cost
is
minimized
and
the
value
maximized
for
opCmal
outcome.

20.
BMW
of
North
America:
Dream
It.
Build
It.
Drive
It.
Recommenda+on

21. Conclusion
1. Expand
the
mass
customizaCon
but
only
for
car
produce
in
US
for
now
Ø Building
on
the
success
of
X3
strategy
Ø Limit
the
mass
customizaCon
to
certain
products
to
see
if
it’s
a
really
relevant
strategy
Ø Don’t
need
to
change
all
the
structure
of
our
worldwide
Supply
Chain
Management
2. Build
our
differenCaCon
by
offering
a
deeper
Brand
Management
relaConship
with
the
our
customers

22. Mass
Customiza+on
for
Limited
Products
Mass
CustomizaCon’s
way
Limited
to
US
Products
TradiConal
way
Online
Order
what
customers
choose If
customer
want
to
buy
mass
customizaCon
Pass
through
the
dealer
with
small
margin
BMW
Dealer
Customer
(factory)
Off-­‐line
shop

23. Digital
Marke+ng
to
Influence
Buying
Decision
Process
In
late
2011,
more
than
70%
of
purchases
originated
from
online
research!
Need
InformaCon
EvaluaCon
of
Purchase
Post-­‐Purchase
RecogniCon
Search
AlternaCves
Decision
Behavior
Brand
Online
Online
Online
Loyalty
PosiConing
Presence
Engagement
Purchasing
Program
High
Performance,
Auto
CommuniCes
Mass
SEO,
Online
Ads
Online
Campaign
Luxurious,
Elegant
&
Reviewers
CustomizaCon

24. Digital
Planning
for
Online
Rela+onship
Crea0ve
Adver0sing
Online
adverCsing:
• PC
banner
• Mobile
ad
Word-­‐Of-­‐Mouth
Marke0ng
• Video
ad
• Social
media
markeCng
• Photo
&
video
compeCCon
AhenCon
• Advertorial
• Facebook
app
/
social
gaming
• “Share
Your
Story”
compeCCon
Share
Interest
Digital
Campaign
• EmoConal-­‐touch
markeCng
communicaCon
• Direct
adverCsing:
lead
generaCon
• Indirect
adverCsing:
automoCve
microsites
&
mobile
applicaCon
Mass
Customiza0on
Online
AcCon
Search
Strong
Online
Presence
BMW
• Search
Engine
OpCmizaCon
Dealer
Customer
(factory)
• InformaCve
BMW
homepage
• Online
communiCes
engagement
• AutomoCve
review
sites
Off-­‐line
Mass
CustomizaCon
shop
ConvenConal
Way

25.
BMW
of
North
America:
Dream
It.
Build
It.
Drive
It.
Q&A